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Thursday, 5 February 2015

‘ONLY KING GAINS FROM MINE FAILURE’



King Mswati III was the only person who stood to gain from the closure of the Ngwenya Iron Ore Mine in Swaziland, because he had been given an advanced loan of US$10 million, that he did not want to pay back.

This was stated by William Kirtley, attorney to Southern Africa Resources Ltd (SARL), the company at the centre of a US$141 million arbitration dispute with the Kingdom of Swaziland. 

Kirtley was responding to accusations made by the Observer on Sunday, a newspaper in Swaziland in effect owned by the King.

SARL held a 50 percent stake in SG Iron Ore Mining (PTY) Ltd (SG Iron), which had formerly been known as Salgaocar Swaziland (PTY) Ltd. The mine was forced to cease trading in August 2014.

On 29 January 2015 SARL issued a media statement announcing it was to bring a notice of dispute and that it would bring international arbitration proceedings against the Kingdom of Swaziland at the International Centre for Settlement of Investment Disputes (ICSID).

The Observer called the announcement a ‘bluff’ and reported that no notice had been published on the ICSID website.

The newspaper quoted Sihle Forward Dlamini, Director Administration at the King’s Office and Assistant Private Secretary to the King, saying ‘Please note that there is no case at ICSID that has been lodged. This (notice of ICSID Arbitration against Swaziland) was sent to internet publishing sites to damage our reputation.’

Dlamini who was also the King’s representative on the SG Iron board, called SARL’s statement a ‘smear campaign’.

In an unpublished letter to the Observer dated 1 February 2015, Kirtley said the notice of dispute had been filed. ‘A notice of dispute is first filed to see if the amicable resolution of a dispute is possible. Only when it is clear that the amicable resolution of a dispute is not possible is the Request for Arbitration filed. Once the Request for Arbitration has been filed, ICSID registers the Request for Arbitration and publishes the dispute on the ICSID´s website.’

King Mswati and the Swaziland Government held 50 percent of the shares in SG Iron. The King personally held 25 percent ‘in trust for the nation.’ However, the King is an absolute monarch and in practice he chooses how the money is used and this helps finance his lavish lifestyle. The King, who rules over an impoverished kingdom of 1.3 million people, has 13 palaces, a fleet of top-of-the range BMS and Mercedes cars and enjoys a lavish lifestyle that includes international travel.

In its notice of investment dispute dated 22 January 2015, SARL said on 21 August 2014 Dlamini issued an order that no more iron ore should be sold.

The notice stated this was ‘a deliberate attempt to create an artificial cash crisis at SG Iron in order to gain control of the company and expropriate the company of its investments. 

It stated Dlamini acted without the agreement of the company’s Board of Directors, even though under terms of the Mining Lease the chairman had a right to veto the decision.

SARL linked the move to destroy the company to 6 April 2012 when a request was made by King Mswati III, through Dlamini, for an advance payment/loan of US$10 million on his future dividend.
It appears to be the desire to avoid the repayment of this advance dividend/loan to HMK [the King] that lies at the root of the expropriation of [SARL’s] investments in Swaziland,’ SARL stated.

The notice stated that blocking the sale of iron ore cost the company ‘many millions’ of dollars in working capital.

It stated sales could have resumed avoiding financial disaster at any time as a considerable amount of iron ore remained at Maputo Port, Mpaka Railway Siding and at the Mine Stockyard.

SARL stated it was later discovered that Swaziland was stockpiling the cargo in order to create an artificial cash crisis since even when there were no sales working capital was still needed to keep the company running.

At this time SARL requested that King Mswati should repay the full or part of the US$10 million loan/advance dividend to continue operation for the good of SG Irons employees and shareholders, as well as Swaziland itself.

However SARL stated, ‘Rather than working with [SARL] for the good of SG Iron’s employees and shareholders, as well as Swaziland itself, [the King’s] representatives demanded further capital injections from [SARL], in effect holding [SARL] as hostage to [the King’s] unilateral decision to stop shipments. 

SARL stated the cash crisis soon spread through its entire operations and the company collapsed.

In his letter to the Observer, Kirtley, the attorney to SARL, said, ‘The only person who stood to gain anything from this was HMK [the King], since the joint venture had provided an advance payment/loan of  US$10 million and, indeed, during one of the final board meetings it was repeatedly requested that this be written off SG Iron´s books.’

Kirtley added SARL owed creditors about E42 million (about US$4 million). ‘Although that amount seems large, [SARL] would very easily be able to pay these creditors if it were in a position to sell the product that it currently has and more so if the price of iron ore recovers.’

See also

‘KING AT CENTRE OF IRON MINE FAILURE’
http://swazimedia.blogspot.com/2015/02/king-at-centre-of-iron-mine-failure.html

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